Retail is a Tech Battlefield

Physical retailers are being challenged from all directions.

Not least by Amazon, who despite the proliferation of pure-play digital retailers were responsible for 43% of total ecommerce sales in the US in 2016. Worldwide, Amazon generated $136bn in annual revenue that might otherwise have been spent in stores, and with ecommerce set to grow another 14% in the UK this year, it’s a safe bet that Amazon will swallow up an even bigger slice of the retail pie in 2017.

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Department stores worldwide

Department stores have been hit particularly hard. In June 2017, Sears Holdings announced it would close 72 Sears and Kmart stores in the US. If this is a war, then this constitutes a considerable retreat. Amazon’s rise has coincided with falling share prices of department stores on both sides of the Atlantic; the likes of Macy’s, JC Penney, Target and Debenhams have all suffered, while BHS’s collapse in 2016 provides a stark reminder of the impact of failing to remain relevant.

Gartner predicts that by 2020 85% of customer interactions will not involve human staff.

Physical retail is, of course, responding to this changing landscape and many brands are applying an omni-channel approach to their models. When done well, this places the consumer front and centre and can offer a digitally enriched in-store experience that links seamlessly with all other touch-points.

Shoppers don’t think of relationships in terms of channels, they just think of the brand – and this requires technology to deliver what the shopper needs, wherever they want it. Technology can enhance the customer experience by providing rich product information on demand, and the shopper should feel in control of this, rather than being “sold at”. At a more sophisticated level, information delivery can sync with online pro les to provide context and suggestions based on the user’s previous interactions with the brand. This can and should be delivered through whatever device the customer feels most comfortable: a large screen, a more intimate screen if appropriate to the context, or their mobile device.

Shop assistant tools

The next generation of stores can drive radically higher revenues per square metre with lower costs

Burberry has equipped its sales associates with iPads since 2012, allowing them to order items online for customers not currently in stock. Something so simple was hugely effective, helping Burberry increase in-store sales by 12%.

Other brands such as H&M and Sephora are implementing conversational AI in the form of chatbots on platforms such as Facebook Messenger and Kik, and using other forms of the technology to improve the functionality of their ecommerce platforms by adding tools such as visual search. Yet AI offers the greatest value to retailers in its handling of data.

 

What we think

The key for brands is to think and act like the challengers that have disrupted their categories. Walmart recognised the need to do this back in 2011, when it acquired web startup Kosmix and incorporated it into Walmart Labs. Innovation labs such as Walmart’s allow retailers to adopt the ‘fail fast, fail often’ mentality by having a designated department that can experiment without the usual constraints of demonstrating immediate profitability.

In physical stores, brands must ensure that they make use of the latest technologies available to enrich the customer experience and gather and act on consumer data in the same way as tech companies.

The key for brands is to think and act like the challengers that have disrupted their categories.

In a simpler time, brands just used to make products. Then they had to learn how to mass market these products, go direct to consumers through their own stores and repeatedly master new channels. The next phase of brands’ evolution is to compete with tech companies, and this will be achieved, ultimately, by becoming tech companies.

Discover 6 tips on how to become an agile brand in the full digital report.